Home >
Publications Directory > Industry / Management > Corporate/Industrial Policy 
-
- Title
- Regulation on Abusing Dominant Position in KFTA and Its Reform
-
- Author
- Rhee, Zusun
- Type
- Research Reports
-
- Subject
- Corporate/Industrial Policy, Deregulation
- Publish Date
- 2005.01.07
-
- File
- -
- View Count
- 13450
Subparagraph 4 in the Article 23 (1) in the Korean Fair Trade Act (KFTA) concerns the regulation on abusing dominant position. It distinguishes between the following five types: 1) coercion to pur- chase; 2) coercion to provide benefit; 3) coercion of sales objective; 4) offering disadvantages, and 5) interference in management.
In this study, we look at ways to improve the existing regulation on abusing dominant position after analyzing punishment records and case studies on precedent reports of the Korean Fair Trade Commission(KFTC). Chapter 2 explains the detail of this regulation and its logical background. Chapter 3 analyses KFTC’s punishment records. Chapter 4 looks carefully at case studies on each type of business practices, in which punishment was applied to violation of the regulation on abusing dominant position. Finally, Chapter 5 summarizes the contents of the study and suggests a proposal for regulatory reform.
According to our analysis of the past punishment record, the number of practices that violated the regulation on abusing dominant position that received punishment was the second largest among 14 unfair business practices. However, it appears that the number of punishment records has been continuously declining since 1996. And, in recent years, this regulation was more applied to consumer promotions rather than business practices. We find also that some businesses abused this regulation as a defense means against superior competitors to hide their lack of competitiveness. This kind of opportunistic behavior was in a sense helped by the ambiguity of the regulation itself. In fact, in their current form, the regulations are not easily susceptible to positive economic analysis.
In addition, the case studies on the above five types of business practices show that the punished business practices can be reclassified into other types of business practices after reexamination in detail and being subject to positive economic analysis. For example, in case of coercion to purchase, all 66 punished practices could be reclassified as reciprocal dealing, tie-in sales and coercion of sales objective. Among several types of business practices punished, only practices related to the judicial procedure could not be reclassified as other types of business practices. However, the Civil Proceeding Act and the laws related to contracts can resolve problems of these types.
In this study, we propose the following four reform suggestions of the regulation.
First, the best alternative to the current existing regulation is the abolishment of the regulation itself because it is too ambiguous and does not render itself to positive economic analytical tools. Further- more, it tends to cause opportunistic behaviors of the losers in market competition. According to the case studies, almost all punished practices might be reclassified into other practices and types, which are more easily analyzed by positive economic analysis. Moreover, the remnant practices could be dealt with through other laws such as the Civil Proceeding Acts and the Fair Subcontract Transactions Acts.
Second, KFTC had better reclassify the accused business practices into other practices which will allow positive economic analysis to be applied usefully if the regulation cannot be abolished.
Third, it is better to apply this regulation only to business practices with vertical externalities. If it is applied to the consumer promotions, which have no externalities to the distribution channel, there are no advantages to promote market competition.
Fourth, if there is some business practice that cannot be reclassified as other practices as the above, this regulation should be applied only based on the principle of facilitation of market competition.
Other Publications On The Subject
Other Publications On The Author
| Next | Problems of Provisions on Related Parties in Tax L... |
|---|---|
| Previous | 7. Effective Regulation Alternatives of Spam Mail |
